According to on-chain analytics provider Glassnode, the late-February crypto market correction may have purged excessive leverage from the markets.

On March 1, Glassnode published a report analyzing the recent crypto crash, which was only the second significant crypto correction since the markets pushed into new record highs in late 2020.

Glassnode noted that the crash peaked with a 25% fall in the price of Bitcoin 

BTC

$22,890

 from the local top of $58,300 to $43,343. As such, the move was weaker than January’s dip, which saw a roughly 30% retracement from $42,000 to less than $30,000.

The analytics provider suggested that these pullbacks are positive for the crypto markets overall, attributing the latest correction to liquidated leveraged positions held by risky speculators:

“Significant market corrections are positive events in that they flush out speculation, leverage, weak hands, and test holder conviction.”

The report added that several key market indicators were reset as BTC prices found fresh support, including futures open interest, futures funding rates and the price premium for Grayscale’s investment products.

Futures open interest, which is the total number of outstanding contracts that have not been settled, dropped almost $4 billion, or 22%, from its peak of $18.4 billion. Glassnode also noted that perpetual futures funding rates have also reset close to zero, which could indicate that traders are not willing to enter short positions, stating:

“Previous combinations of decreasing open interest and a reset of funding rates have indicated a flush in speculative trading has occurred.”

However, the report did note that open interest is still hovering roughly $2.5 billion above the previous peak of $3.9 billion on Feb. 21, meaning there is still significant leverage within the market.

Glassnode also noted that shares in Grayscale’s Bitcoin trust are trading at a discount compared with spot market prices for the first time ever, with investors receiving a nearly 4% discount to access exposure to BTC through Grayscale’s trust.

It added that competing products such as Canada’s Purpose ETF could diminish Grayscale’s premium as more institutional products enter the market and close arbitrage opportunities.

At the time of writing, Bitcoin prices were up 5.3% over the past 24 hours, with BTC currently changing hands for $49,200.